Five questions to tackle before making Foreign Contribution Regulation Act (FCRA) applications

For the uninitiated, FCRA is the law that governs how non-profit ventures accept donations from foreign sources. Although we have written a lot of blog posts pertaining to the Foreign Contribution Regulation Act, 2010 and its predecessor in 1976 (FCRA) here, we realized that there are some very common clarifications that people still have.

We are providing some background here – while non-profits operate without a profit motive, they will still need funds to pay their expenses, hire employees, take office space and conduct operations. Investors and lenders do not see business sense in making investment or granting loans to these ventures. Therefore, funds for non-profits can be generated through revenues from operations, external donations or a combination of both. Without FCRA, donations can only be taken within the domestic market (which is of course, very limited). Your horizons widen significantly if you can access foreign sources of money. In fact, even accepting donations from Indian companies which are subsidiaries of foreign parents (Google India, Microsoft India) requires FCRA compliance as these are considered foreign sources of money.

What is the opportunity that lies?

Many people (especially wealthy individuals) are taking to non-profit ventures to find an outlet for their charitable instincts. Profitable companies are also establishing independent non-profit arms. These non-profits or non-government organizations can be structured as trusts, societies and non-profit companies often need to find professionals who can help them with FCRA related work.

For structuring and obtaining donations, they typically need a manager or an internal resource person at the strategic level who understands FCRA and who can find and liaise with professionals. There is also significant career opportunity for professionals such as lawyers, secretaries and especially Chartered Accountants who have experience in FCRA work. The work includes preparing FCRA applications, replying to clarifications from the Ministry, getting registrations and making filings.

The questions

What is the time period required for getting registration certificate after sending signed application with all documents. What is the time period required for getting prior permission after submitting documents to Ministry?

The law prescribes a 90-day period for granting registration / prior permission. In reality, it can take up to 6 months. Where a donation is being taken for multiple projects, e.g. a slum development program, education, environment preservation, etc. then it can even take longer.

Who can certify documents, whether CA certification will do?

Self-certification by the Chief Functionary in the organization is sufficient for the application and the undertaking. If you like, you can get the incorporation documents certified by a gazetted officer. Under the law there is requirement for a certificate of recommendation to be provided by the District Collector or a Ministry/ Department of the Central or State Government. In practice, a letter from the branch manager of the bank where a separate bank account has been opened to obtain foreign donations is typically supplied. Banks also attach a disclaimer stating that they are not responsible for the actions of the company (other than what is imposed under law).

Whether there is a need to visit Ministry in Delhi for registration or only postal communication will serve the purpose.

After filing from FC-3 / FC-4 online, postal communication is all that is required to send a hard copy form to the Ministry. You do not need to visit the Ministry in person. However, the Ministry may request clarifications from you in case it notices any defects or inconsistencies in the application. You can send replies through registered post (so that you get an acknowledgement) or you can personally visit the ministry to take a receiving on a copy of the documents you file.

If prior permission is taken for a specified number of donors, whether that will be permission for one time and we need to get prior permission again if further contribution is to be accepted.

Prior permission is only valid for one-time donation. A fresh application will have to be made for any new donation, and there must be a minimum gap of 6 months.

Whether there will be visit by authorities to verify trust.

The Ministry does not undertake or arrange for any visits/ inspections to verify the trust. They will only scrutinize the documents and point out defects (if any), which you can rectify and then re-submit the relevant documents.

We thank Mr. Ansari Akhlaque, a Pune based Chartered Accountant for asking us these questions and probing us to provide answers to them for the benefit of our readers.